Big pubcos hammered by MPs
MPs are calling for a full-scale review of the tie by the Competition Commission and "urgent action by the Government" in a hard-hitting report on the pubco-tenant relationship.
The Business and Enterprise Committee (Bec) report finds "alarming evidence" that there may be serious problems caused by the dominance of the large pub companies.
Bec's unanimous conclusions were coloured by its survey of 1,000 licensees, which committee chairman Peter Luff said backed up the personal views submitted by many licensees. Among the key findings were:
• 44% of licensees had not been given a breakdown of how their rent was calculated
• 67% earned less than £15,000pa and 50% of the licensees who had a turn-over of £500,000pa earned less than £15,000 — a 3% rate of return
• 64% of licensees did not feel their pubco added any value.
Luff told Morning Advertiser: "We are just not convinced that the benefits of the beer tie outweigh its disadvantages. There needs to be a proper look at the effects of the tie on competition, which is why we are recommending a reference to the Competition Commission."
And in words that will dismay trade bosses, he added: "There must be a legal framework that takes account of the imbalance of bargaining power between licensees and pubcos."
Bec falls short of calling for the tie to be scrapped, however, saying more detailed analysis of the market is required.
But Luff, who served as a researcher on the 1989 Beer Orders report, said he is personally in favour of abandoning the tie, though he is "anxious to protect the regionals".
The report says the Department of Business, Enterprise and Regulatory Reform "needs to look urgently at the bargaining power between pubcos and lessees".
Luff, who has written for the MA this week, said: "The committee found some business development managers were excellent, but there was a worrying pattern in the evidence of verbal agreements not honoured and, on occasion, of downright bullying."
The report says it is "astounding" that no low-cost dispute resolution system had been put in place since the 2004 Tisc Report.
Luff said Bec members were surprised by the industry's general lack of response to Tisc recommendations. "They had manifestly not addressed that report's concerns. If they'd done a bit more, we wouldn't have looked at them this time round when we had so many other issues to consider.
"We were very concerned with the practice of putting a restrictive covenant on the sale of pubs by pubcos, preventing them from remaining as pubs. We may well be over-pubbed, but the market should decide these things, not pubcos."
Government now has two months to respond, and Luff is confident the report will not be left gathering dust. "There is so much back-bench pressure that I'm sure this Government, and a Conservative government too, will have to act."
Pubco failings identified
• Rental system lacking transparency
• Pubcos not sharing benefits equitably
• Too many BDMs offer lessees little or no support
• Verbal agreements not honoured by pubcos
• Bullying of licensees
• No low-cost dispute resolution system
• Unfair AWP tie remains
Read more on Pubco Report
• BEC chairman Luff speaks out
• Pubcos: status quo not an option
• Pring: Wake up for the pubcos
• Camra: OFT better placed to review beer tie
• Fair Pint jubilant at pubco report
• BBPA: tie is robust and flexible
• Punch: reject Competition Commission calls
• Diary Special: Pubco Report
• ALMR: pubcos willing to change
• GMB: sign up to continue the fight for fairness
• Fair Pint — the story behind the campaigners
• Enterprise Inns rejects BEC conclusions
• Camra report wants OFT to probe pubcos
• Mulholland: new beer orders required
• BII: BEC misunderstood our role
Have your say on the trade's only live forum. What do you think of the report? Let us know by clicking Post a comment below.
